Inflation falls further to 2.8%

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Inflation plunged to 2.8 percent in the eleventh month of the last fiscal year 2016/17 compared to 11.1 percent of price rise in the same period of the previous fiscal year 2015/16.

Unveiling the ‘Current Macroeconomic and Financial Situation of Nepal (Based on Eleven Months’ Data of 2016/17)’ on Tuesday, the Nepal Rastra Bank (NRB) said that the inflation, as measured through the consumer price index, eased further on the accounts of improved supply situation of the country.

With the prices rising at a slower pace in most of the months of the last fiscal year 2016/17, the average annual inflation of the country is all certain to remain below the 7.5 percent target of the central bank.

NRB officials say that the high base price of the previous fiscal year when the country suffered unofficial blockade from India is one of the major factors on the slower rise of the prices.

“In the last fiscal year, the supply situation has improved. There was unfavorable condition in the country in the previous year which had hit supplies and pushed up prices at a high level,” said Nara Bahadur Thapa, executive director at the NRB. “The prices grew at a slower pace since the base was already high in the previous year,” added Thapa, who heads the Research Department of the NRB.

It is the household kitchen where the pinch of price rise has been felt the least. According to the NRB data, the food inflation turned to negative by one percent in mid-June 2017, implying that the prices of food items went down from the level of mid-June 2016 when the food prices had gone up by 11.9 percent.

According to the report, a fall in prices of pulses and legumes by 17.5 percent, vegetable by 16.3 percent and ghee and oil by one percent were mainly responsible for such a decline in food inflation. Of food and beverage group, the prices of sugar and sugar products increased 11.5 percent and alcoholic drinks 10.8 percent in the review period.
Some analysts say that the inflation has fallen in Nepal as the inflation of India is also on a downward trend in recent months.

According to the NRB’s periodic report, the year-on-year consumer price inflation was 1.5 percent in India in June 2017. Such inflation was 2.8 percent in Nepal during the review period showing inflation wedge of 1.3 percent. Such inflation was 11.1 percent in Nepal and 5.8 percent in India reflecting a wider inflation differential of 5.3 percent in the corresponding period of the previous year.